Editorial: No’ votes on bailout plan unacceptable

Those who believe the market should sort out the nation’s financial crisis are about to find out what its solution is.

Those who believe the market should sort out the nation’s financial crisis are about to find out what its solution is.

With the U.S. House’s rejection Monday of the massive financial bailout package and the resulting stock market plunge, the country could be headed for major financial peril.

Lawmakers need to quickly resolve whatever issues they have with this legislation and hold another vote. Those who voted “no,” including one member from Springfield’s delegation, Rep. John Shimkus, R-Collinsville, must reconsider.

This plan is designed to do nothing less than avert an economic meltdown. It calls for the government to buy up to $700 billion in tainted mortgage-backed securities, freeing up lenders to again meet the country’s basic credit needs. Some economists believe it’s unlikely that the bill means taxpayers are kissing $700 billion goodbye because the government eventually could make a profit when the economy improves.

We suspect some of those who voted “no” feared for their political lives amidst calls, e-mails and polls showing their constituents were angry that rich folks who made bad, greedy decisions were going to be bailed out. Other votes were no doubt based on ideology and a belief that the government was interfering too much with the free markets.

Neither reason is acceptable with this much at stake. Congress must act to avoid the potentially disastrous consequences of this financial turmoil.

Conservatives have vehemently argued against the plan, with some calling it socialism. They say by not allowing economic players who acted irresponsibly to fail, the government negates the whole point of capitalism.

This is an incursion into the economy by the government that no one wants. But if you believe Treasury Secretary Henry Paulson, top congressional leaders of both parties and economists throughout the ideological spectrum, the consequence of not saving those who deserve to fail is that they will take many of us down with them.

It's a persuasive argument. Many economic leaders say that without the bailout, the availability of credit will continue to tighten, making it difficult or impossible for small businesses and individuals who have acted responsibly to borrow money. Without needed funds, businesses small and large could be forced to layoff workers or fail outright. That’s not to mention the tanking stock market in which many Americans have their life savings tied up.

Many just don’t believe this worst-case scenario. But it is instructive to look at the actions of the Bush administration during the last 14 days. Bush’s has been one of the most ideological, free-market, anti-government regulation administrations in history. Its decision to let Lehman Brothers fail signaled that there would be no more bailouts and that it felt the market could absorb such failures.

But then the Treasury Department changed course and said the entire economy would be imperiled without government action. This major reversal shouldn’t be taken lightly.

Democrats and Republicans have modified Paulson’s original plan to add layers of oversight and require Paulson to get congressional approval for future installments of the $700 billion. They have ensured that the leaders of companies that get government assistance will not leave their companies with golden parachutes. And House Republicans inserted a provision where firms could get insurance for the tainted securities, a sensible alternative that could save taxpayers money.

There still is hope that the bailout could cost much less than $700 billion, and that the government could end up making money because it will own pieces of the companies from which it buys the rotten mortgage securities.

This is one of those votes where members of Congress must, for the good of the nation, look their constituents in the eye and disagree with them. They may be kicked out of office, but if they don’t do the right thing, history’s judgment may be much harsher than a lost election.

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